Ap­peals court reins in judge on Sec-cit­i­group set­tle­ment

The Washington Times Daily - - Business -

NEW YORK | A fed­eral ap­peals court said Thurs­day that a judge likely over­stepped his au­thor­ity when he blocked a $285 mil­lion set­tle­ment over toxic mort­gage se­cu­ri­ties by call­ing it bad pol­icy for a reg­u­la­tory agency to ac­cept a deal that does not in­clude an ad­mis­sion of li­a­bil­ity.

The 2nd U.S. Cir­cuit Court of Ap­peals in Man­hat­tan sus­pended the ef­fect of Judge Jed Rakoff’s decision to turn down the set­tle­ment be­tween Cit­i­group and the Se­cu­ri­ties and Ex­change Com­mis­sion un­til it can fully study the case.

It said there was a “strong like­li­hood” that Cit­i­group and the SEC would suc­ceed in over­turn­ing Judge Rakoff’s rul­ing. In do­ing so, a three­judge ap­peals panel noted that Judge Rakoff thought it did not serve the public in­ter­est for the SEC to let Cit­i­group set­tle with­out ad­mit­ting li­a­bil­ity.

“It is not, how­ever, the proper func­tion of fed­eral courts to dic­tate pol­icy to ex­ec­u­tive ad­min­is­tra­tive agen­cies,” the 2nd Cir­cuit rul­ing said. “While we are not cer­tain we would go so far as to hold that un­der no cir­cum­stances may courts re­view an agency decision to set­tle, the scope of a court’s au­thor­ity to sec­ond-guess an agency’s dis­cre­tionary and pol­icy-based decision to set­tle is at best min­i­mal.”

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